An investment strategy restricts the portfolio to a mix of two stocks A and B with the following price/share and annual returns:
Stock Price/Share Annual Return
A $35 5%
B $45 7%
Assume that the maximum amount available for investment is $100,000 with the following 2 prioritized investment goals:
Rank R1: Obtain an annual return of at least 6%.
Rank R2: Limit the investment in stock B to no more than 55% of the total investment.
Assume X1 = dollar amount allocated to stock A, and X2 = dollar amount allocated to stock B.
What is the objective function?
A) Min d1+ + d2-
B) Min R2(d1+) + R1(d2-)
C) Min R1(d1-) - R2(d2+)
D) Min R1(d1+) + R2(d2-)
E) Min R1(d1-) + R2(d2+)
E
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